Supplemental Disclosure Material - Ono

In addition, we expect to enter into hedging arrangements with respect to payments of interest and a portion of the
principal under the New Notes. Subject to certain conditions, we are required under the New Senior Facility to enter into
hedging arrangements with respect to all interest payments until December 1, 2013 (the first optional redemption date) and
50% of the aggregate principal amount of the New Notes. We are currently evaluating such hedging arrangements, though
there can be no assurance that we will enter into such arrangements or what the terms thereof may be. New hedging
arrangements to manage the risk of currency fluctuations may be costly and may not insulate us completely from such
exposure.
Risks Relating to Our Business
We may be affected by a further deterioration of economic conditions in Spain.
Our financial results are substantially dependent upon the overall economic conditions in Spain. After a period of
economic growth, Spain entered into a recession in the third quarter of 2008. The effects of the global economic downturn
were exacerbated by a real estate crisis and pressures from a relatively high fiscal deficit and foreign indebtedness. Spain’s
gross domestic product (“GDP”) declined by 3.1% from 2008 to 2009, although GDP grew by 1.0% in 2010 and is expected
to have grown by 0.7% in 2011 according to Eurostat. However, according to the European Commission, GDP is expected to
decline by 1.7% in 2012 and, according to INE, unemployment in Spain reached 24.4% in March 2012. Spain’s public debt
experienced a series of downgrades in recent years, including most recently a downgrade in April 2012. An extended
recession, or public perceptions of declining economic conditions, could substantially decrease the demand for our services
and adversely affect our business. The ongoing crisis in the Eurozone may also adversely affect the Spanish economy and our
business. During periods with deteriorating economic conditions and high unemployment, consumers have less discretionary
spending to purchase services, including telecommunications services. For example, as a result of the economic downturn, in
2008-2009 we experienced decreased demand for our services and our revenues declined from €1,616 million in 2007 (in
accordance with Spanish GAAP) to €1,472 million in 2010. In 2011, our revenue increased slightly to €1,485 million but has
not returned to 2007 levels. During the 2009-2011 period, our residential fiber customer numbers declined by 19 thousand.
While the impact of a continued economic slowdown or recession on our business is uncertain, it could result in declines in
revenue without a corresponding decrease in expenses and adversely affect our results of operations and financial condition.
We may not generate sufficient cash flow to fund our operations or capital expenditures.
The operation, maintenance and upgrade of our network, as well as the costs of sales and marketing of our products
and services, require substantial upfront financing. We have major capital resource requirements relating to, among other
things, the following:
• Developing and deploying new products and services, such as next generation TV;
• Implementing new technologies;
• Maintaining the quality of our network;
• Consolidating our brand in the market;
• Increasing the loyalty of our customer base; and
• Continuously improving our processes and procedures through the implementation of systems and
technologies.
Our ability to fund our ongoing operations depends on our ability to generate cash. Our ability to generate cash
depends on many factors. For a discussion of these factors see “—Risks Relating to our Financial Profile”. In addition, our
liquidity and capital resource requirements may increase if we expand into additional areas of operation or if we make future
acquisitions. We may not generate sufficient cash flow or have access to sufficient funding to meet these requirements. If we
fail to meet these requirements, our operations could be significantly adversely affected and future growth could be
significantly curtailed.
The Spanish fixed and mobile residential broadband internet, television and telephony markets as well as the business
telecommunications market are highly competitive and may become more competitive in the future, which could result in
lower prices for our products and the loss of current and potential subscribers, which would result in reduced revenues
and could materially adversely affect our profitability.
We face significant competition from established and new competitors that provide fixed and mobile residential
broadband internet, television and telephony services as well as business telecommunications services in Spain. We also face
potential competition from new entrants. In some instances, we compete against companies with fewer regulatory burdens,
larger financial resources, more comprehensive products and services, greater personnel resources, wider geographical
coverage, greater brand name recognition and more established relationships with regulatory authorities and customers.
Broadband Internet: Telefónica (operating under the Movistar brand) is our principal competitor with respect to
broadband internet services. Telefónica is the former monopoly provider of most telecommunications services in Spain.
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